A company has assessed its exposure to fraud risk in terms of potential fraud losses and has
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Question:
A company has assessed its exposure to fraud risk in terms of potential fraud losses and has determined the following:
The monthly mean of fraud losses is $15,000 and monthly standard deviation of fraud losses is $55,000.
The confidence level applied assumes a normal distribution
The risk-free rate is 4%pa.
The monthly net income is $95,000.
1. What is SmartBank’s annual Value at Risk exposure, using a 95% confidence level
2. Calculate the monthly RAROC, using a 95% confidence level
3. Calculate the amount of Economic Capital needed annually for the potential fraud losses based on a 99% confidence level
Related Book For
Financial Institutions Management A Risk Management Approach
ISBN: 978-0071051590
8th edition
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
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